Serviced office – Ideal solution in a recession economy

In a recession economy like Nigeria, many new entrants, particularly international corporates are still deciding whether to “stay” or “go”. A solution that companies are taking advantage of to buy more time before final decisions are made is serviced offices. This situation is what accounts for the stability in the serviced office sector of the economy – particularly in Lagos.

By definition, a serviced office is an office or office building that is fully equipped and managed by a facility management company, which then rents individual offices or floors to other companies.

A key benefit of serviced offices is flexibility. Serviced offices are generally able to offer more flexible rental terms, as opposed to a conventional leased office which may require furnishing, equipment, and more restrictive leases. The space is normally flexible, allowing for additional space to be allocated at short notice should the size of an individual business change. This means that for company unsure of what the next steps are in their business strategy execution, they are accorded greater flexibility.

The short term nature of their leases makes serviced offices a great solution or option for small businesses and international companies setting up in a new country or region. Occupants are able to pay their rent on a monthly or quarterly basis. If you’re enjoying a particularly successful period of business, then renting somewhere in a prestigious location could really improve the reputation of your business. In some cases, depending on the business strategy, some international firms test the market first before making final business decisions. To do that, they definitely have to consider a short-term solution for their office space. If the firm enters a period where they’re financially unstable, and are looking to expand, they can extend both their space and lease for an additional six months or a year and then consider moving to a more permanent space. Serviced offices are usually located in the best or central side of town with a prestigious address. This is really helpful when it comes to networking, as it’s so much easier to meet influencers in the industry, potentially leading to future collaborations. This helps to determine where to be permanently situated once the final business decision to remain in the market is made. The location of the serviced office is as such quite important. Whether it’s to attract and retain the right people, portray the right image to customers or be in the best possible place to keep business buoyant, location and the working environment can be the difference between success and failure. We must note the fact that the facilities made available are usually top-quality facilities. This is one of the best benefits of using serviced offices, having access to top quality facilities. But it comes at a cost higher than one would incur in a permanent space solution. Serviced offices are usually kitted out with top of the range technology, as such; businesses have the option to use video conferencing facilities, top quality computers and high quality internet. This tends to be the main advantage of using serviced offices, especially for small business that may not be able to stretch their budget to buy all the latest technology when starting out. Serviced office providers also allow tenants to share reception services, business machines and other resources which helps keep down upfront costs.

Another reason why serviced offices have grown in popularity especially in emerging markets is due to the fact that most companies do not want to worry about day-to-day property management. As such, serviced offices are considered as temporary solutions because they enable businesses to have accommodation that suits their individual needs without the hassle of finding, managing and furnishing the space. In a serviced office tenants are able to expand and contract as they wish, usually at very short notice. This can be beneficial to businesses when times are good and they need more space quickly or conversely when it needs to contract. The flexibility and ‘all inclusive’ service would be more expensive for a businesses than a conventional lease but the costs involved will vary depending on the location, how many desks are taken and the length of stay.

Businesses of all sizes use serviced offices as an interim measure while they wait for permanent premises to become available. This enables them to set up specific project teams, house people in another city or move their whole business to another location. our recommendation as real estate consultants is to use a reputable operator when taking serviced office space as a business will be relying on them to run their office for them – from answering calls to meeting clients when they visit or fixing the equipment such as copying machines and other facilities made available when it breaks down. When looking for serviced office space, businesses should be clear on exactly what they need to get from the location and what services they value. If they do this then they give themselves every opportunity of finding an office where they can flourish.

Serviced offices, without a doubt, offer corporates several advantages, but they do however bear a key challenge particularly for long-term players – and this is the cost incurred by the occupants/tenants. Serviced offices run anywhere from two to three times the cost of typically leased offices (otherwise known as permanent offices). A good way to mitigate against these costs is to reduce the headcount / sqm ratio.

In this recession hit economy, plug and play serviced offices are a welcomed solution for companies whose business strategies are still evolving. Due to the cost challenges however, serviced offices should be considered as “short-term” real estate solutions.

About the Author

Chinwe is based in Lagos, Nigeria and is responsible for the delivery of a full spectrum of real estate services across West Africa. She has over 14 years experience and was previously head of the JLL French International Desk. She holds a Masters in Business Administration from Harvard Business School.